China’s growing appetite to reduce pollutants is regarded as one of the big issues facing the global commodities market, in particular iron ore and steel demand, according to a commodities strategist.
Speaking to a packed auditorium on the second day of the RIU Explorers Conference in Fremantle, ANZ senior commodity strategist Daniel Hynes said the Chinese government’s targets to reduce pollutants had seen constraints placed on heavy industry, forcing the market into more sustainable uses of resources.
Environmental impacts of heavy industry in China has had the biggest impact on commodity markets in past twelve months,” he said.
“I was in China quite recently and I saw the sky in Beijing for the first time in memory.
“The ability of Chinese government to reduce the pollutants and improve air quality in that country in past 18 months has emboldened them essentially to continue to constrain heavy industry, reducing raw material movement around the country and pushing that market into more sustainable uses of resources.
Mr Hynes said the steel industry was where this reduction was happening front and centre and the targets to reducing steel capacity.
“Cuts over next couple of years will be around 35Mt but what it’s doing is having a significant impact on the type of raw materials being consumed,” he said.
Mr Hynes also noted the significant growth in the electrical vehicle market with China fundamental in driving demand for battery minerals.
“We could see electrical vehicle sales that make up about 35 percent of total sales by end of 2035 from relatively low levels now which is around 1 percent,” he said.
“We are coming from a very small base and electric vehicle growth is certainly going to explode but impact is going to be limited in the short term.”
Mr Hynes said the metal markets have woken up to the significant impact of electric vehicles with nickel and copper benefiting.
“The impact of lithium ion batteries will have a quite substantial impact on the nickel market, quite a significant pick up in volumes and a major reason for the increase in nickel prices,” he said.
“Copper use in an EV compared to a conventional car is around nine times the amount. If public transport really starts to use electric vehicle technology, you will see a significant increase in demand for copper to be used in electric powered buses.”
However, the news isn’t so good for oil with the growth in EV’s having the potential to displace 1.8Mbl of oil a day, or about 2% of oil demand, Mr Hynes said.
The RIU Explorers Conference – which has always begun the resource conference year – features presentations from 58 resource companies exploring and/or mining for commodities ranging from precious metals (gold and silver), base metals (copper, nickel and zinc) through to the in-vogue energy metals (cobalt and lithium).
Along with the presentations, over 70 exploration and mining companies, government bodies and mining services companies are featured in the RIU Explorers Conference exhibition area.